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News Release

Singapore

Jones Lang LaSalle’s Perspective: URA’s revision of development charge rates for the period 1 September 2013 to 28 February 2014

Continued upward revision in DC rates for the industrial use group with an average of 15.4% increase across all sectors.  Large increase in DC rates for landed and non-landed residential uses.


​SINGAPORE, 30 August 2013 – The latest revision of the development charge (DC) rates effective 1 September 2013 to 28 February 2014 witnessed a continued increase in average rates for use group B1, B2 and D of 6.8%, 4.9% and 15.4% respectively. As expected, rates for use group B2 have seen a marginal upside with average increase of 4.9% from the March 2013 revision considering the credit tightening measures introduced recently.

In the use group B1 (landed residential), we notice a rare trend where the percentage rate of increase is the same across some many sectors despite their different DC rates. For instance, sectors 34, 46, 48, 57, 71, 92, 93, 95 to 97, 99, 103 and 104 all had the same “13%” increase despite the DC rates ranging between $3,290 to $5,600 (March 2013) to the present $3,710 to $5,600 (September 2013). The aforementioned sectors are found to be mainly in the central and central east segments represented by the key regional areas of the River Valley, Tanjong Katong and East Coast Park. The same scenario applied for sectors 35 to 37, 52, 54 to 56, 58 to 61, 72, 88, 94, 98, 101, 105, 107 and 111 to 113 where all of these 21 sectors saw the same 11% upside of DC rates. Again, these sectors are mainly in the clusters of Geylang, West Coast and Balestier areas. The Chief Valuer seems to be “playing catch up” with the revision of these rates across all sectors. 

In the use group B2 (non-landed residential), rates rose an average of 4.9%, compared to the 0% change in the March 2013 round of revision. The largest spike of 28% is recorded in sector 74 (Tiong Bahru segment) followed by an increase of 18% in sector 60 (Moulmein area). The sharp increase of 28% for sector 74 is most likely with reference to the non-landed residential GLS site located at the center of Tiong Bahru estate that was transacted at a land price 117% higher than the DC rate implied land value recently in April 2013. For sector 60, the Ultra Mansion at Derbyshire Road was sold en bloc for redevelopment in March this year at land price 35% over the implied land value.

Interestingly, many of the sectors seeing rates increasing at more than 10% have no notable transactions with land price that is significantly higher than the implied land value. This lends to the view that Chief Valuer may be taking this opportunity to close the gap in land prices between use groups, which in this instance is the upward revision of non-landed residential where there was no change in the previous round of revision.

In contrast, the use group A (commercial) witnessed zero change and likewise, use group C (hotel/hospital). The two groups recorded the top two increases in rates at 23.7% and 26.1% respectively during the March 2013 round of revision. Despite empirical evidence that reflected transaction price significantly higher than the implied land value, there was no revision in the rates.   Despite some industrial land price slipping marginally, there is a general increase of 15.4% increase in September 2013 revision in addition to the 0.6% increase previously in March 2013.

Dr Chua Yang Liang, Head of Research and Consultancy at Jones Lang LaSalle says: “Although the adjustment is higher than market expectations, if we look at the overall trend, Chief Valuer seems to have taken this opportunity to close the gap in land values between asset classes. The adjustment is not just within but across use groups. For example, we noticed a general widespread increase in industrial land prices, given a somewhat modest increase of only 0.6% in March 2013. Correspondingly, sectors that registered strong gains such as Commercial and Hotels during the March revision saw no change this time round. Residential in general which registered modest gain previously has now been revised upwards in the scale of 4.9-6.8% on average.”

“Based on this observation, I reckon the upward revision for residential and industrial is theoretically a strategic move to minimise the potential outflow of hot money from the commercial and hotels back into industrial and residential.” Dr Chua added. 

Looking ahead, this revision is unlikely to affect the enbloc market adversely. Mr Karamjit Singh, Head of Investment Sales at Jones Lang LaSalle, opines “Based on the collective sale cases that Jones Lang LaSalle is managing, no DC is payable for about 16% while another two-thirds had their rates maintained. In other words, more than 80% of our collective sale sites have experienced no increase in overall land price. For the remainder, the effect on overall land price increases is less than 1% as the DC component is small compared to the overall land price.”
 
He added: “We even have an interesting case involving a rezoning from industrial to residential (non-landed) use that will see its overall land price reduce by about 3% as the base DC rate (for industrial) has increased but the proposed non-landed residential rate was maintained. In general, the impact of this round of DC rates revision for collective sales is marginal.”

 
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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management.
Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 26, 100 employees operating in 79 offices in 14 countries across the region. The firm was named ‘Best Property Consultancy’ in nine Asia Pacific countries at the International Property Awards Asia Pacific 2012, in association with HSBC, and was named the number one real estate advisory firm in Asia Pacific in the Euromoney Real Estate Awards 2012. www.ap.joneslanglasalle.com 
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